D Procurement Flashcards
1
Q
When should you use the full form of NZIA SCC?
A
Projects of any size or complexity where a wide range of risks should be contained.
2
Q
When should you use the short forms?
A
In relation to alterations or new building work of a simple nature, having a relatively low value, and capable of being completed in a reasonably short contract period.
3
Q
What are the two NZIA construction contracts where the architect is administering?
A
NZIA SCC
NZIA SCC SF
4
Q
What are the two NZIA construction contracts where the architect is not involved in the construction phase?
A
NZIA NBC - G
NZIA NBC - SW
5
Q
Who owns the copyright for the NZIA contracts? Who can use the contracts?
A
The NZIA
Practices who are members of the NZIA and hold an Architects Document Set license.
6
Q
Who is named as the architect in the Standard Conditions?
A
The NZIA Practice
7
Q
Can you modify the standard conditions?
A
No. You can fill out the schedules and you can add information in the special conditions.
8
Q
Describe the SCC Contract
A
A contract between principal and contractor for the construction of contract works of any size and complexity where the architect administers the contract on behalf of the principal.
9
Q
Describe the NBC Contract
A
A contract between principal and contractor where the architect is not engaged to administer the contract.
10
Q
When should you discuss procurement with your client?
A
As soon as possible in the design process. Different approaches to procurement may significantly influence the architect’s role, liabilities, and ability to provide a quality service.
11
Q
What are the advantages for your client in using the NZIA SCC?
A
- Only generally recognised documents within the industry which provide for the role of an architect during construction.
- Familiarity with the standard conditions of tender and contract enable contractors to bid competitively.
- Wide use in the industry means it is simple for the architect to administer and easy for the contractor to comply.
- Architect’s role is well defined.
12
Q
What should you advise your client to consider it they would like to use a different contract?
A
Professional Risk Limitations
Quality assurance limitations
Definition of the architect’s role
13
Q
What is a GMP contract?
A
Guaranteed Maximum Price
Fixing the maximum price of a project at the completion of sketch or developed design where the contractor has the ability to vary the work to maintain price and programme.
14
Q
GMP Advantages and Disadvantages for Principal?
A
- Quality is at risk
- Cost is fixed
- Time is fixed
15
Q
GMP Advantages and Disadvantages for Consultant?
A
- Quality is at risk
- Consultant cost might be harder to define
- Time may be under pressure
- Potential liability risk, particularly if novated to the contractor.
16
Q
GMP Advantages and Disadvantages for Contractor?
A
- May influence quality
- May have more control of cost
- Get to influence time, setting the time frame
17
Q
What is cost/risk sharing in GMP?
A
The maximum cost of an element is agreed, and the savings difference is split once the true costs are known.
18
Q
What is a CRC contract?
A
Cost Reimbursement Contract
Often known as charge up. Appropriate to use when it is difficult to be precise about total contract price at tender stage.
19
Q
What should the contractor provide at Tender Stage if you are negotiating a CRC contract?
A
An estimate of cost and lump sum items where possible to establish a notional contract price - will be needed for insurance at the least.
20
Q
What is a Guarantee?
A
Undertaking by a third party in favour of the first party to act in the event that the second party does not fulfil their obligations under the guarantee.
21
Q
What is a Warranty?
A
An undertaking by one party to another (to make good defects in the contract works).
22
Q
Example of guarantees?
A
Master Builders New Home 7-years Guarantee Agreement
23
Q
What to consider for warranties?
A
What time period is normally offered?
Client expectations
Strength of the party offering warranty
Likelihood of needing it
24
Q
List some common warranties
A
Tanking Roofing Aluminium Joinery Tiling Flooring Plumbing Electrical
25
Where are the required warranties listed?
In the specific conditions of the contract, and also in the specification.
26
When are warranties required?
In 3910 they are required before the defects liability period certificate can be issued. Others think it should be before practical completion is applied for.
Common sense says as soon as possible.
You should state when they are required in the contract.
27
Why is it best for the warranty to be with the main contractor (rather than the sub)?
- Your contract is with the main contractor
- MC chooses their own subs - we have little control
- MC often in better financial position to pick up defects.
28
How would you execute a warranty from a subcontractor?
In the manner required under the Companies Act section 180.
| Varies company to company, but generally two directors will be required to sign.
29
What rights does the principal have in correcting defective work?
- Defects liability retentions
- Warranties
- Other legal remedies (CGA)
30
Why are there no general conditions of contract available for labour only contracts?
1. There is not one contract, but several separate contracts with a lot of overlap.
2. Each situation is different.
31
If there are still incomplete works at the end of defects liability, who determines the outstanding value?
The architect - needs to determine what it will cost the principal to do the required work. Not what the contractor says they can do it for.
Seek help from QS if needed.
32
If tendering, what documents should be made available to the tenderers?
```
Drawings and Specs
Standard Conditions of Contract
Copy of the Schedule of Quantities (if one exists)
Tender Forms
Tender Instructions
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33
How long should you allow for a tender?
At least three weeks - but should be adapted to suit the project.
34
Can the architect share details of interested subcontractors with the tenderers?
Yes, and vice versa as increasing numbers of subcontractors may be beneficial to the client.
Consider when to do this as you don't want them passing information around.
35
Can a tender be received by email?
Yes, if provided in the tender schedule specific conditions.
36
Can you accept a late tender?
No, it is invalid. You must return it to the tenderer unopened.
37
What should you do if a tender appears to be unreasonably low?
The architect should notify the tenderer so they can confirm or withdraw. Any tenderer may withdraw a tender before acceptance.
38
Once a tender is accepted, what do you send to the unsuccessful tenderers?
A list of the tendered sum submitted by each tenderer - though not usually identified - together with the name of the successful tenderer.
39
When does a contract exist (in a tender process)?
As soon as a tender is accepted (normally by letter of acceptance). Validity is not affected by any delay in signing the contract docs.
40
How many tenderers would be sufficient for competitive tendering?
Maximum of 6
41
What kind of trade summary might you use in tender?
T5 Schedule from NZIA
| or Masterspec Tender Summary form.
42
What is a prime cost sum?
A material related monetary allowance. Does NOT include costs associated with installation.
Cost of materials + margin.
43
Who is responsible for principal supplied items?
The principal
44
Issues to consider with separate contractors?
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Coordination
Responsibility
Insurance
Performance Liability
Extra work involved for contractor and architect.
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45
Where is the insurance for separate contractor's work?
Should be in the main contract works insurance.
46
Is the main contractor responsible for the performance of the separate contractor?
No
47
Is the main contractor responsible for the performance of a nominated sub-contractor?
Yes, they become subcontractors just like any other.
48
When would you want to use a nominated subcontractor?
For critical sub-trades with specialist skills and a wish by the architect/principal to control who does this work.
49
What is contained within SCC Schedule A1?
Contract Agreements - this is where the agreed price is recorded and the contract is signed. It also lists all of the documents included in the contract.
50
SCC B1?
Specific Conditions of Contract - lists the items that must be responded to. All items must be addressed - do not delete.
51
SCC B2?
Special Conditions - those that alter any of the standard conditions. Should be kept to a minimum.
52
When would you allow fluctuations in cost?
Only when there is a long contract period or a period of high and unpredictable inflation.
53
What is a contractor's performance bond?
Document arranged between principal and contractor to provide protection for the principal against financial loss resulting from the default of the contractor.
54
When does the bond need to be in place?
Before the first progress payment application.
55
Tender acceptance when a contractor's performance bond is in place?
Acceptance should be conditional on supply of the completed bond.
56
When is the bond discharge?
At practical completion - discharged by the issue of a PC certificate to the principal with a copy to the contractor, or the issue of a letter to the contractor.
57
Process when the bond needs to be called up?
1. Establish that the default warrants the bond.
2. Confirm to the principal the circumstances, justifications and estimate of damages.
3. Certify to the contractor that they are in default and advise damages.
4. Check with bank that payments have been made to principal.
58
How much should a bond be?
5-10% (Kaimai has 7.5%)
| May be higher, depending on the project.
59
What is a Romalpa Clause?
A contractual device to protect the supplier of goods. Under the clause, even though the goods have been supplied to the purchaser on credit, the supplier retains ownership until they have been paid for in full.
60
What does a Romalpa clause protect against?
Non-payment of goods.
| Seizure of goods by liquidators.
61
Why should the principal effect the construction insurance on works to existing structures?
To avoid conflict or overlap with existing building insurance.
Full disclosure to insurance company - best to keep insurance with same insurer.
62
What is Public Liability Insurance?
Provides cover for the contractor for any damage to third party property and interests, and for personal injury.
E.g. equipment, neighboring buildings, infrastructure, people.
63
What is a cross liabilities clause?
Means each party (principal and contractor) can claim against the other as if they had separate policies.
64
How much public liability should a contractor have?
Depends on the project.
Typically 1-2M will be sufficient.
5-10 is usual on project where surrounding buildings present more risk.
131 is 10M.
65
What is Motor Vehicle Third Party Liability?
Cover for contractor for any damage to third party property and personal injury resulting from the use of vehicles.
66
What is Plant and Equipment Insurance?
Cover for contractor for any damage to construction machinery - so they can reinstate in the event of a loss.
67
Run-off vs. Cut-off policies?
Run-off - policy continues until date of project completion.
| Cut-off - policy stops at set expiry date.
68
Do schedules F2-F5 need to be completed before work commences?
YES
We missed this at Joe's Garage.
Need to be verified against schedule F1 as disparities often occur.
69
What are the three main goals of the Construction Contracts Act 2002?
1. Payments
2. Adjudication of Disputes
3. Review and Enforcement
70
What does the CCA apply to?
All construction work - includes all design, engineering and QS work associated.
71
Can you contract out of the CCA?
NO
| But you are free to elect not to invoke the CCA's payment process.
72
If a re-measure is required on the schedule of quantities, who should pay?
Set out in the SCC - depends who requested. Either contractor or principal.
73
What is a provisional sum?
A work or item related monetary allowance - includes installation.
74
Example of a Prime Cost Sum?
Tile supply
Sanitary whiteware
Tapware
Light fitting supply
75
Example of provisional sums?
Cabinetry supply and installation
Telecommunications, data cabling
Security system
76
How are monetary sums dealt with in the payment claim?
Deduct the sum allowed, and
| Add the actual cost
77
Are deposits allowed?
Not under SCC unless a special condition.
SCC allows contractor to claim for value of work done.
3910 allows contractor to make advance payments.
But both cases the principal has security over the goods.
78
What is the risk of deposits?
Non-delivery - contractors going into receivership etc.
| Suggest payment for manufactured off site goods instead - once something has been built.
79
How could you manage risk of deposits?
- Agree the terms
- Agree whether part of first payment, last payment or other.
- Suggest payment might be made direct to party who requires it.
80
When can you accept payment for off-site goods?
- When agreed with principal and advised as acceptable at the time of tender.
- That conditions are met including; compelling reason, ownership to principal, safe storage, insurance.
81
What would be valid benefits for the principal for off-site payments?
- To avoid cost increases
- To avoid delays (materials on indent)
- For bulk material storage
82
What is one of the aims of the CCA?
To facilitate regular and timely payments between the parties to a construction contract - the Act sets out timing. SCC sets out obligations and roles.
83
How often may the contractor submit a payment claim?
Once a month under SCC
84
When is a payment claim deemed to be submitted?
At the beginning of the first working day following the day the payment claim was received by the architect.
85
What is the total time frame for a payment claim to be paid?
17 Days
86
When does the final payment claim need to be submitted?
No timeframe under act or SCC. Monthly payments are required until all amounts are agreed. SCC provides timeframe for assessment.
87
What are liquidated damages?
An agreed assessment of the loss that the principal will suffer if the contract works are not completed on time. Will be upheld by the courts.
88
Difference between LD's and penalties for late completion?
Penalties might not be upheld by courts - should seek legal advice.
89
Can a principal claim damages if there are no LD's in the contract?
Yes, but it may take time to process and they will have to be proven.
90
Difference on retentions between SCC and 3910
3910 releases 50% at PC
| SCC releases 40% at PC
91
Describe the Traditional contractor engagement?
Linear, sequential. Common in residential work.
| Clients establish brief, engage consultants for design and tender docs, let a contract and then occupy the building.
92
What are management contracts?
Where the main contractor performs a management role to manage subcontractors.
A number of separate contracts are managed by an organisation who have no hands-on construction involvement.
Suits large infrastructural projects requiring a number of activities.
Only as good as the overarching management’s ability to manage the separate contractors.
93
What is a Project alliance?
Team based contract for construction.
Used on large projects – normally >$100M.
Still an owner, but the project team for delivery forms an alliance. Share in the risk for gains and losses of the profit.
94
Design Build Contract?
The contractor takes on responsibility for design and construction.
Can provide certainty in cost – cost benefits. Contractor’s expertise helpful.
Can be faster, but might need extra time at tender stage.
E.g. design-build for mechanical services.
Useful when:
• Functionality is a priority over quality
• Cost certainty is needed
• The brief is clear
• Single point of responsibility
95
ECI?
Early Contractor Involvement
| A type of construction contractor where the contractor is engaged early to offer input into the design phase.
96
What is fast-track Procurement?
Where design and construction processes are partially or fully overlapped. Intent is to gain procurement earlier than in a traditional tender.
Tendering might happen on the contractor’s P&G and Margin – depends on completeness of design.
Suited to design-build or novated projects.
97
What is a collaborative works agreement? CWA?
A contractual arrangement which sees two parties enter a long-term business arrangement which is designed to deliver shared goals.
Defines the relationship and sets out the responsibilities.
98
What is a BOOT? Build Own Occupy Transfer?
Project delivery method – usually for large scale infrastructure projects. E.g. entertainment venue, road, sewage treatment plant.
Might be used for Public Private Partnership agreements where the private company designs, builds, maintains and operates an asset for a set period of time.
99
What is a bond?
Bond – provided by a surety (the bank) in the name of the tenderer.
Used in situations where the contractor favors cashflow – e.g. Kaimai.
Held until the end of the defects liability period.
100
What is the difference between a demand vs. performance bond?
An on-demand security bond is an unconditional obligation to pay when a demand has been made. A surety bond or performance guarantee requires certain conditions to be met (proven to be not met) before payment is made.
101
What are monetary allowances?
Prime Cost, Provisional or Contingency Sums.
The contract may provide for any part of the contract works to be carried out under one of these types of sums.
Aim to minimise the amount of these in the contract as they represent uncertainty to the client.
102
What is a letter of intent and what are the risks around its use?
A document expressing an intention to enter into a contract at a future date. Creates no contractual relationship.
Typically used when one party is carrying out preparatory works before a formal contract is finalised.
The risk is that a LOI does not necessarily constitute a formal contract. Risk if work is done under a letter of intent, but the conditions of contract are not included or end up being materially different.
Example story of Fletchers as MC engaging Electrix as SC to do works up to a set value.
103
How are tenderers notified whether or not they have been successful in the bid?
As soon as practicable after a tender is accepted, each tenderer should be sent a list of the tendered sum submitted by each tenderer (doesn’t need to be identified by name), together with the name of the successful tenderer.
104
What is a contingency sum?
An allowance for work unknown at time of tender.
105
What is a schedule of quantities?
A document that contains descriptions of all items of work required to carry out a given construction project.
106
How do you deal with discrepancies in a schedule of quantities?
Process set out in SCC-C2
Re-measure arranged
Contractor pays if there are no faults in SQ.
Principal pays otherwise.
